Monday, April 21, 2008

Ad buying goes digital

Ad buying goes digital
By Eric Pfanner
The International Herald Tribune

For all the talk of "digital this" and "2.0 that," one part of the advertising world remains defiantly analog: the buying and selling of ad space and time in traditional media like television and print.

Eschewing online auctions and other digital-age transactional tools, owners of offline media and the agencies that allocate marketers' ad budgets often turn to an older negotiating forum: the bar.

There, over a beer, they can run through the available ad space in, say, a newspaper, and determine how much an advertiser is willing to pay. They can haggle over how much of a discount the advertiser should get, compared with the media owner's published ad rates. And, in some cases, they can decide how much of that discount should go back to the media-buying agency as part of its compensation for brokering the deal.

Advertisers sometimes complain about the lack of transparency in this arrangement, though media buyers say their clout helps them negotiate better deals than their clients would be able to strike otherwise.

Digital evangelists say there is greater clarity online, at least when marketers use systems like Google's AdWords, which places text advertisements alongside search results, using an online auction to allocate a keyword to the highest-bidding advertiser. Google has moved to extend its services to offline advertising in the United States, with agreements to sell newspaper, radio and some television spots.

Now an online media buying venture based in London is trying to do something similar in Britain. The firm, called MediaEquals, was set up by Martin Banbury, a marketing executive and entrepreneur, who described it as an "online stock exchange" for advertising.

The exchange allows media owners to list their available advertising space or time slots online; they can choose from a variety of pricing methods, including an auction system that allows agencies to bid competitively for the ad opportunities. Media buyers can go online and get a clear picture of what is available.

"When there's more transparency, people are able to spot greater value," Banbury said. "That opens up markets for additional trading."

Several media buying agencies said they would participate in the MediaEquals pilot. These agencies are eager for alternatives to Google, because its online auction system essentially cuts them out of the deal. MediaEquals, by contrast, keeps them in the loop; its system essentially moves the existing media buying process online.

"They aren't looking to replace the traditional buyer-seller relationship," said Jim Marshall, chairman of one of these agencies, the British unit of Starcom MediaVest, which is owned by Publicis Groupe.

MediaEquals plans to begin operating in a few weeks in Britain. If it succeeds, Banbury said, the goal is to expand the service to other markets, including Continental Europe and the United States.

Some media buyers are skeptical about the benefits of automating the process, noting that the planning of marketing campaigns has grown more complex, given the proliferation of new, digital media formats.

The biggest challenge for Banbury may be to persuade media owners to make attractive ad slots available on the system. MediaEquals is not the first online ad exchange, but previous initiatives have tended to focus on subprime advertising niches, like selling late-night space on cable television. A U.S. service, Bid4Spots, for example, allows radio advertisers to buy unsold radio air time.

Banbury said several media owners, including the magazine publishing arm of the British Broadcasting Corp. and the billboard owner CBS Outdoor, along with radio stations and newspapers, have agreed to join the system for the pilot program. Media owners will be charged a commission to sell their ads on MediaEquals.

"If I can get my inventory across more eyeballs, then I've got nothing to lose," said Matt Teeman, ad sales director at BBC Magazines. "The challenge will be to see how it can coexist alongside personal relationship. I don't think people will stop making phone calls or seeing each other in person."